San Diego

Two weeks after it held up the $150.6-million bond issue, the City Council on Monday relented and authorized the offering of industrial development bonds for San Diego Gas & Electric.

Mayor Roger Hedgecock said the city bonds would help reduce rates for SDG&E; customers. Still, he urged the utility to immediately settle a suit it filed against the city 11 years ago. Hedgecock had organized the opposition to the bond issue because SDG&E; had refused to settle its 1974 inverse condemnation suit against the city over SDG&E-owned; land in Sorrento Valley.

Since the earlier refusal to issue the bonds, Hedgecock and Councilman Bill Cleator have met with SDG&E; officials to seek a solution and allow the city to spend $5 million still held in reserve for possible payment of damages in the case. Though no settlement was reached, the council decided to issue the bonds. When SDG&E; receives the tax-exempt financing to expand its service, it expects to pay 3% less interest than it would have under its own first mortgage bonds. The utility has estimated the bond issue will enable it to save $4.5 million a year over about 40 years.